Exhibit 99.3
NEITHER
THIS
SECURITY
NOR
THE
SECURITIES
ISSUABLE
UPON
CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES
SECURITIES
AND
EXCHANGE
COMMISSION
OR
THE
SECURITIES
COMMISSION OF ANY STATE OR UNDER THE
SECURITIES ACT OF 1933,
AS AMENDED.
THE
SECURITIES
ARE
RESTRICTED
AND MAY NOT BE
OFFERED,
RESOLD,
PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED
UNDER THE ACT PURSUANT TO
REGISTRATION
OR EXEMPTION OR SAFE
HARBOR THEREFROM.
No.
US $300,000.00
----------------
WATER CHEF, INC.
CONVERTIBLE PROMISSORY NOTE DUE FEBRUARY 17, 2007
THIS Note is a duly
authorized
issuance of $300,000.00 of WATER CHEF,
INC., a
Delaware
corporation and located at 1007 Glen Cove Avenue,
Suite 1, Glen Head,
New York 11545 (the "Company") designated as its Convertible Note
(the "Note").
FOR VALUE RECEIVED,
the Company promises to pay to SOUTHRIDGE PARTNERS
LP, the
registered
holder
hereof (the
"Holder"),
the principal sum of three
hundred thousand and 00/100 Dollars (US
$300,000.00),
plus accrued interest in
the
amount of eight
percent
(8%) per year for all
outstanding
principal
on
February 11, 2007 (the "Maturity Date").
The principal plus accrued interest of
this Note is payable at the option of the Holder at any time after
the
Maturity
Date,
in shares of the Company's
common
stock,
par value of $0.001 per share
("Common Stock") as set forth below, or in United States dollars,
at the address
last
appearing on the Note
Register of the Company as designated in writing by
the Holder. The Company will pay the outstanding
principal amount of this Note,
plus accrued interest,
in cash on or before the Maturity Date, less any amounts
required
by law to be
deducted,
to the
registered
holder of this Note.
The
forwarding of such wire transfer shall constitute a payment
hereunder and shall
satisfy and
discharge the liability for principal on this Note to the extent of
the sum represented by such wire transfer plus any amounts so
deducted.
Capitalized
terms used herein and not otherwise
defined
herein shall
have the respective meanings set forth in the Loan Agreement and
the Transaction
Documents of even date.
This Note is subject to the following additional provisions:
1.
The Note is issuable in
denominations of Ten Thousand Dollars
(US$10,000) and integral multiples
thereof,
provided that the number of shares
to be issued
upon
conversion
is a minimum of 3,000
(unless if at the time of
election
to
convert
the
number
of
shares of
Common
Stock
issuable
upon
conversion is less than 3,000).
The Note is exchangeable for an equal aggregate
principal amount of Note of different authorized denominations,
as requested by
the
Holder
surrendering
the same.
No
service
charge
will be made for such
registration or transfer or exchange.
1
1.A
The
Company
shall have the right to redeem
this Note at any
time by providing
written
notice to the Holder by making a cash payment to the
Holder of the outstanding
principal
amount of the Note multiplied by a premium
according to the
following
schedule,
plus all accrued
interest:
105% of the
outstanding
principal
amount if
redeemed
within 120 days after the
issuance
date; 110% of the outstanding
principal amount if redeemed between 121 days and
180 days after the issuance date;
112% of the outstanding
principal
amount if
redeemed
between
181 days and 365 days after the
issuance
date;
115% of the
outstanding principal amount if redeemed after 365 days after the
issuance date.
Written notice to the Holder shall be received at least 5 business
days prior to
the date of redemption payment ("Redemption Date"). If the
redemption payment is
not made on or before
the
Redemption
Date,
the
redemption
notice
shall be
rendered null and void and the Holder thereafter shall have the
right to convert
any portion of the outstanding principal of the Note.
1.B
This Note is further
secured
pursuant to a Pledge
Agreement
and a Guarantee, each dated October 11, 2006 between the
Pledgor/Guarantor,
and
the
Holder
whereby
the
Pledgor/Guarantor
has
guaranteed
this Note and has
granted to Holder a security
interest
in
Collateral
to secure the payment of
this
Note.
Such
security
interest
may be
perfected
by the
filing
of the
applicable UCC statements in the appropriate recording offices.
2.
The
Holder of this
Note is
entitled
at any time
after the
Maturity Date, at its option,
subject to the following
provisions,
to convert
all or a portion of the principal amount of this Note plus accrued
interest into
shares of Common
Stock at a
conversion
price for each
share of Common
Stock
equal to the Current
Market Price
multiplied by eighty five percent (85%) (the
"Conversion
Price").
"Current Market Price" means the average of the three (3)
lowest closing bid prices for the Common Stock as reported by
Bloomberg,
LP or,
if not so reported,
as reported on the over-the-counter
market, during the ten
(10)
trading days ending on the trading day
immediately
prior to the relevant
Conversion Date (as defined below).
The amount of shares issuable pursuant to a
conversion
shall equal the principal amount (or portion thereof) of the Note
to
be converted, plus accrued interest, divided by the Conversion
Price.
Conversion
shall
be
effectuated
by
surrendering
the
Note
to the
Company,
accompanied
by or
preceded
by
facsimile
or other
delivery to the
Company of the form of conversion
notice attached hereto as Exhibit A, executed
by the Holder evidencing such Holder's
intention to convert a specified portion
hereof. No fractional shares of Common Stock or scrip representing
fractions of
shares will be issued on conversion,
but the number of shares issuable shall be
rounded to the nearest
whole share.
The date on which notice of
conversion is
given (the "Conversion Date") shall be deemed to be the date on
which the Holder
faxes or otherwise
delivers the
conversion
notice
("Notice of
Conversion"),
substantially
in the form annexed
hereto as Exhibit A, duly
executed,
to the
Company. Facsimile delivery of the Notice of Conversion shall be
accepted by the
Company
at
facsimile
number
516-656-9095
ATTN:
PRESIDENT.
Certificates
representing
Common Stock issuable upon
conversion
shall be delivered
within
four (4) business days from the Conversion Date. ("Delivery Date").
2
The Company
understands
that a delay in the issuance of the Shares of
Common Stock beyond the Delivery Date (as defined in this Section)
could result
in economic loss to the Holder. As compensation to the Holder for
such loss, the
Company
agrees to pay late
payments to the Holder for late
issuance of Shares
upon Conversion, unless the delay is due to causes beyond the
reasonable control
of the Company or the Transfer Agent, in accordance with the
following
schedule
(where "No.
Business
Days Late" refers to the number of business days which is
beyond three (3) business days after the Delivery Date):(1)
Late Payment For Each $10,000
of Note Principal or Interest
No. Business Days Late
Amount Being Converted
----------------------
----------------------
1
$
100
2
$
200
3
$
300
4
$
400
5
$
500
6
$
600
7
$
700
8
$
800
9
$
900
10
$1,000
>10
$1,000 +$200 for each Business Day
Late beyond 10 days
The Company shall pay any payments
incurred
under this Section in
immediately
available funds upon demand as the Holder's remedy for such delay.
Furthermore,
in addition to any other remedies
which may be available to the Holder,
in the
event that the Company fails for any reason to effect delivery of
such shares of
Common Stock by close of business on the Delivery
Date,
unless such failure is
due to causes
beyond the Company's
reasonable
control or that of its Transfer
Agent,
the Holder will be entitled to revoke the relevant
Notice of Conversion
by delivering a notice to such effect to the Company,
whereupon the Company and
the Holder
shall each be restored
to their
respective
positions
immediately
prior to delivery
of such
Notice of
Conversion;
provided,
however,
that an
amount equal to any
payments
contemplated
by this Section
which have accrued
through the date of such
revocation
notice
shall
remain due and owing to the
Converting Holder notwithstanding such revocation.
If, by the
relevant
Delivery
Date,
the Company
fails,
unless such
failure is due to causes beyond the Company's
reasonable control or that of its
Transfer
Agent,
for any
reason
to
deliver
the
Shares
to be
issued
upon
conversion
of the Note and after
such
Delivery
Date,
the Holder of the Note
being
converted (a "Converting
Holder")
purchases,
in an
arm's-length
open
market transaction or otherwise,
shares of Common Stock (the "Covering Shares")
------------------
3
in order to make
delivery
in
satisfaction
of a sale of
Common
Stock by the
Converting
Holder (the "Sold Shares"),
which delivery such
Converting
Holder
anticipated
to make
using
the
Shares to be issued
upon such
conversion
(a
"Buy-In"), the Converting Holder shall have the right, to require
the Company to
pay to the Converting
Holder, in addition to and not in lieu of the amounts due
hereunder (but in addition to al
